ROME, Italy / AsiaWire.IO / – The Bank of Italy expects the country’s gross domestic product to grow by 1% in 2026, above its previous forecast. Growth is then projected to slow to 0.7% in 2027 before edging up to 0.8% in 2028. The central bank published the figures in its Economic Bulletin on October 16. It also warned that a fresh surge in crude oil prices could wipe out growth this year.
The 2026 estimate was revised up by 0.4 percentage points from the projections the bank published in June. The 2027 forecast rose by 0.3 points, while the outlook for 2028 was cut by 0.1 points. In June, the bank had expected growth of 0.5% in 2026 and 0.4% in 2027. The new figures are based on information available up to October 9. Adjusted for the number of working days, 2026 growth stands at 0.9%.
The bank said the upgrade mainly reflects a smaller impact from the Middle East crisis in the first half of the year than it had expected in June. Investment linked to the digital and energy transitions also supported activity. Strong tourism during the summer quarter added to growth. The 1% forecast for 2026 matches the estimate in the government’s Draft Budgetary Plan. Employment is expected to keep rising, with unemployment near 6%.
Oil shock could push Italy into contraction
The central bank warned that economic uncertainty remains high. A sharp rise in crude oil prices, coupled with accelerating inflation, could bring growth to zero this year. Under that adverse scenario, the economy would contract by 0.3% in both 2027 and 2028. The bank described the conflict in the Middle East as a major source of uncertainty for the outlook. Energy prices remain the main channel of risk for the economy.
The baseline assumes oil prices average $114 per barrel in the fourth quarter of 2026. Natural gas is assumed at €76 per megawatt hour over the same period. Both are expected to decline over the rest of the forecast horizon. The bank expects the rise in market interest rates to pass gradually to borrowing costs for firms and households. The European Central Bank raised its key interest rates in September.
Inflation expected to ease by 2028
Consumer price inflation is projected to average 3.2% in 2026, driven mainly by energy costs. The bank expects it to slow to 2.4% in 2027 and 1.7% in 2028. Core inflation is forecast to stay at around 2% across the period. Household consumption is set to weaken in the second half of 2026 and in 2027. Higher prices are expected to erode real incomes during that time.
Consumption should regain momentum towards the end of the forecast period, according to the bank. Investment is expected to slow significantly in 2028 as financing costs rise. Exports will be supported by demand in Italy’s main markets. Their growth is still expected to lag behind international trade, which is being driven by high-tech goods such as AI products. Italy’s participation in that segment remains limited, the bank said.